Westpac has initiated a new phase in the competitive rewards credit card market by enhancing benefits for frequent flyers, amid industry-wide adjustments prompted by changes to interchange fees. The Reserve Bank’s mandated reduction in interchange fees, effective October 1, is expected to reduce revenue for financial institutions by more than $660 million, prompting major banks to reevaluate their rewards offerings.
While many card issuers have responded by increasing annual fees, raising interest rates, lowering points earn rates, and, in some cases, removing travel insurance benefits, Westpac is distinguishing itself by offering substantial incentives to new customers. The bank is providing 50 Qantas status credits and 150,000 Frequent Flyer points on selected credit cards, and up to 150,000 Virgin Australia Velocity points with its Westpac Altitude Black card.
These moves come amidst a backdrop of significant changes from Commonwealth Bank, which recently overhauled its Yello rewards program. The revamp introduced a $149 annual fee for Qantas frequent flyers who wish to convert Yello points at a three-to-one ratio, while Virgin Australia Velocity members face a $99 annual fee to convert points at a 2.5-to-one ratio. The adjustments reportedly led to dissatisfaction among users, with anecdotal reports of some customers leaving the program.
Frequent-flyer analyst Adele Eliseo described the revised Yello rewards scheme as overly complex, with intricate conditions affecting how points are earned and converted. She noted that while existing Commonwealth Bank customers might navigate the program’s requirements more easily, new entrants would encounter numerous hurdles. Eliseo also highlighted that many customers who previously benefited from monthly fee waivers now face annual fees.
Brandon Loo, editor-in-chief of Point Hacks, concurred that Commonwealth Bank’s updated program is less advantageous for those aiming to accumulate points solely through credit card spending. He emphasized that unlocking the program’s best benefits typically requires a significant mortgage or savings relationship with the bank.
Conversely, Westpac’s offerings have been welcomed by aviation loyalty programs. Velocity CEO Andrew Cleary noted that the 150,000 Velocity points offered with the Altitude Black card are sufficient to fund return travel to Europe. Cleary acknowledged modest adjustments to points earn rates across various banks, describing them as anticipated outcomes following the Reserve Bank’s interchange fee reforms.
A Qantas spokesperson reported robust double-digit growth in new Qantas credit cards issued in the last quarter, underscoring continued consumer enthusiasm for earning points through everyday spending. The representative emphasized that co-branded cards remain the most efficient and rewarding method for members to build their points balances.
As the credit card sector adapts to regulatory changes, competition among banks is intensifying, with Westpac’s enhanced rewards positioning it to capture frequent flyers seeking lucrative travel benefits.